The state of Ohio announced Wednesday it reached a settlement in which it recovered a little more than half the $2.7 million it lent to Toledo’s Buckeye Silicon, a defunct polysilicon manufacturer that might have misused millions in taxpayer funding.

A Blade investigation published in October revealed Buckeye Silicon, which agreed to a $1.5 million settlement, operated under a parent company registered to a mailbox in Las Vegas that was linked to an empty warehouse in Arcadia, Calif. The newspaper also revealed Mark Wu, Buckeye Silicon’s chairman, was the subject of an investigation for peddling faulty polysilicon machinery in a $150 million deal with a Hong Kong company.

The state took a $1.2 million loss on the investments it made in Buckeye Silicon through a $1.3 million loan from the Ohio Development Services Agency and a $1.4 million loan from the Ohio Air Quality Development Authority in October, 2010.

“I’m disappointed we were in this situation at all. I have a hard time looking at this loan and seeing that this was ever a good decision to have made, and I wish we had a better outcome,” said Jeff Jacobson, vice chairman of the state air authority. “This apparently is the best we can do.”

The state was largely unaware of issues with Buckeye Silicon, its executives, and Sphere Renewable Energy Corp., the firm’s parent company, before it invested in the firm.

Mr. Wu did not return a call seeking comment. Harrison Choi, Buckeye Silicon’s chief executive officer, could not be reached for comment.

The air authority, which hired an accounting firm in 2012 to probe Buckeye Silicon’s operations, sued the company for fraud in March. Its lawsuit, filed in Franklin County Common Pleas Court, stated Buckeye disguised $100,000 in state funds as a broker’s fee to pay one of its owners and “failed to provide evidence that its polysilicon manufacturing equipment actually produces polysilicon.”

State officials said they have received the $1.5 million.

Mr. Jacobson said Buckeye Silicon never should have received state funding and his gut tells him that there’s more than meets the eye when it comes to the firm.

“As we investigated and as we had our lawyer investigate, I pressed them regularly to see if there was evidence that could support criminal allegations and our people didn’t find anything that rose to that level,” he said. “The crusader in me thinks there’s something very wrong here but there doesn’t seem to be the evidence to support it.”

Dan Tierney, a spokesman for Ohio Attorney General Mike DeWine, would not disclose whether Buckeye Silicon, its parent company, or its executives are under criminal investigation.

After being contacted by The Blade about the Hong Kong investigation into Mr. Wu, the Development Services Agency placed Buckeye Silicon’s loan in default. Lyn Tolan, deputy director of policy and communications for the agency, credited the state’s action in recouping the $1.5 million.

The state typically is unable to recoup business investments that go bad because companies close and or have little to no assets by the time they’re in trouble.